US Lawmakers Call for Crackdown on Financial ‘Catalysts’ After Pandora Papers


A bipartisan group of lawmakers this week will introduce legislation that, for the first time, would require trust companies, lawyers, art dealers and others to investigate foreign clients seeking to transfer money and assets into the American financial system.

Sponsors of the bill cited findings from the Pandora Papers, a broad international collaboration released this week that revealed how the global elite are hiding their wealth in tax havens that increasingly include the United States.

The stories of The Washington Post and the International Consortium of Investigative Journalists (ICIJ) have shown that little-known trust companies in Sioux Falls, South Dakota, have established nearly 30 trusts in recent years linked to people or companies accused of bribery. , human rights violations or other wrongdoing in some of the world’s poorest communities. The investigation also revealed that King Abdullah of Jordan secretly used offshore companies to buy three properties in Malibu and revealed the use of two offshore trusts by an art dealer, now deceased, who was charged by US prosecutors trafficking looted Cambodian artifacts.

The proposed law, known as the Enablers Act, would amend the 51-year-old Bank Secrecy Act by requiring the Treasury Department to create basic due diligence rules for U.S. custodians that facilitate the flow of foreign assets. in the USA.

Banks are already required to investigate their clients and sources of wealth, but trust companies, lawyers, investment advisers, accountants, art dealers, public relations firms and other professionals were excluded from due diligence rules – a loophole regularly criticized by financial crime experts and international watchdogs.

The proposed legislation, experts say, represents the most important reform of anti-money laundering rules since September 11.

“If we force banks to report dirty money but allow legal, real estate and accounting firms to look the other way, it creates a loophole through which crooks and kleptocrats can navigate a yacht,” the representative said. Tom Malinowski (DN.J.), co-sponsor of the bill and co-chair of the Congressional Caucus against Foreign Corruption and Kleptocracy, said Wednesday. “Our bill closes that loophole and encourages the administration to move in the same direction.”

Malinowski called on the White House to support the legislation, co-sponsored by Representatives Steve Cohen (D-Tenn.), Bipartisan Committee on Security and Cooperation in Europe co-chair Joe Wilson (RS.C.), ranking member of the commission, and Maria Elvira Salazar (R-Fl.), member of the caucus.

“All over the world, countries are being looted and the most vulnerable people victimized by their elites,” Cohen said. “These kleptocrats then launder that money in the West, where they enjoy the high life – spending the money on fancy cars, penthouses, jets, and opulent parties. Some also spend it to intervene in our democracy… to work to undermine the rule of law. In order to fight corruption, we need to curb the catalysts. “

If passed, the law would give the Treasury Department until December 2023 to create anti-money laundering rules for custodial industries. A new national security task force would oversee the effort.

After September 11, banks – criticized for serving and protecting terrorists, drug traffickers and dictators – stepped up their due diligence practices. Financial crime experts say such moves have encouraged criminals to find other financial custodians, including the US trust industry.

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“Criminals all over the world, kleptocrats, dictators, they’re going to be looking for new ways to launder their money and we’re going to try to shut them down, but the gap right now is just huge – we’ve basically left our financial defenses big. open, ”said Paul Massaro, a congressional anti-corruption adviser who helped work on the proposed legislation.

In South Dakota, now considered a premier destination for global wealth, trust companies oversee more than $ 360 billion in assets, state data shows. The post and the ICIJ investigation have identified a series of international clients who have transferred their assets to trusts in South Dakota in recent years, including a Colombian textile magnate implicated in an international money laundering scheme. drugs and a Brazilian executive of orange juice accused of collusion to underpay. local farmers.

“Regulating professional facilitators is how the United States could stop being the world’s first offshore financial haven, start treating dirty money as a major national threat, and start demonstrating how democracies can fight adversaries. corrupt and powerful special interests, “said Josh Rudolph, a staff member of the National Security Council of the Obama and Trump administrations who recently released a analysis on the role of financial controllers.

On Sunday, the ICIJ, The Washington Post and 150 media partners began publishing the Pandora Papers investigation, which revealed the transactions and assets of 35 current and former world leaders and more than 330 politicians and public officials in 91 countries. and territories, including the United States. .

“If we are serious about fighting the dictatorship, we need American professionals to do the most basic due diligence – no American should take money from members of the Chinese Communist Party, Iranian mullahs, Russian or other oligarchs, ”Wilson said. “The Facilitator Law is an essential national security measure. “

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